Common Payroll Implementation Mistakes (and How to Avoid Them)

Payroll Management

You’ve done your homework and you’ve finally found the perfect payroll provider for your business. But shopping around for different payroll providers and actually carrying out a payroll implementation are two very different stories. As a result, implementation mistakes are common and can sometimes sour relationships between providers and users early on.

The good news is, many of these payroll implementation mistakes are easily avoidable if you plan accordingly. To ensure that it’s smooth sailing from day one, we’ve highlighted some of the most common payroll implementation mistakes and how you can avoid them.

Need more information? Check Out: “Setting Up Payroll: The Ultimate Guide”

1. Lack of Planning

No matter how big or how small your company is, you need to create a map from your starting point to your destination. You may be eager to leave your old payroll system behind, but trying to rush through an implementation may end up replicating the same problems you have with your current payroll provider.

Instead, you need to start with a plan. A good plan should include the following:

  • A complete timeline for the switch.
  • Key stakeholders who will be impacted by the switch.
  • Availability of staff to facilitate the transition.
  • Information from your current provider about your data and how to access it.
  • Training and support available for those who will be using the new system.

Of course, all of these factors will vary based on your company. If you’re a mom and pop shop with just a handful of employees, your plan will be fairly straightforward. However, if you’re tackling a global payroll system for thousands of employees, you might need to bring in people like a data analyst to carry out the data extraction, or a project manager to coordinate the switch.

When in doubt, you can always ask your new payroll provider what they recommend. In most cases, your new provider has carried out thousands of payroll implementations, so they should be able to make recommendations for what is best for a company of your size.

2. Not Maintaining Data Integrity

In the immortal words of bookkeeper and Knit customer Sherri Lee-Mathers, “if you put garbage in, you’re going to get garbage out.” By this she means that the kind of data you input into your new payroll system will influence what you get out. If the data is inaccurate from the start, it may become embedded in the system, and result in significant errors over time. 

In order to avoid the dreaded “garbage in, garbage out” scenario, it’s important to prepare your data well in advance. Prior to making the switch, take the time to:

  • Audit your current data—all of it.
  • Cleanse your data of anything you might not need anymore (keeping in mind that the CRA requires you to “keep all required records and supporting documents for a period of six years from the end of the last tax year they relate to”).
  • Identify any missing payroll fields.
  • Request any important documents from your current provider, such as copies of all Payroll Register Reports and copies of pay stubs for all employees, so you have a complete set of records for each employee.

While it may seem like a time-consuming process, taking the time to check for any inaccuracies or inconsistencies upfront will save you from countless errors down the line.

3. Not Customizing the Platform

For those unfamiliar with payroll or used to doing things manually, payroll software may seem like a kind of “one-size-fits-all” solution. As a result, many payroll administrators sometimes stick to the default settings on their new platform. This often means that things are running less efficiently than they could be and that the company is not enjoying the full benefits of the software.

In reality, many of today’s cloud-based payroll systems are extremely flexible and can be configured to fit your company’s exact needs. Whether that means adding custom income types or running off-cycle payrolls, many platforms can be adjusted to your exact specifications. Therefore, when implementing a new payroll software, it can be beneficial to customize the platform upfront.

4. Failure to Map Out Integrations

These days, it’s very rare for a payroll software to be the only technology that a company is using. Rather, payroll platforms are generally part of a comprehensive technology stack that includes accounting software, time-tracking apps, HR solutions, and more.

However, problems often arise when companies fail to consider these integrations from the start. For instance, a payroll software may integrate with QuickBooks Online, but not offer a direct integration with other accounting software solutions such as Sage or Xero. If Xero is your go-to accounting software, you don’t want to find out halfway through the implementation process that there’s no way to connect your data.

The best way to make sure that information is properly flowing from one app to another is to map out your integrations from the start. Once you have an idea of what information you need and where it needs to go, ensure that the payroll provider you choose can accommodate your app requirements. You can then ask your new provider to help you properly set up the app integrations and run some tests to double-check that the information is following through correctly.

5. Skipping the Testing Phase

As mentioned above, testing is vital when it comes to integrated apps and the same is true of your payroll. The problem is, many companies are eager to get started and skip the payroll testing phase in an effort to save time. This not only makes it difficult to know whether there are payroll errors or inconsistencies with your new software, but it also makes it harder to fix these problems down the line.

Though it may seem like a bit of a hassle at the time, carrying out parallel runs is one of the best ways to test how your new payroll system is working. Parallel runs simply means running the old payroll software parallel to the new software and then comparing the results to find any inconsistencies.

To run a parallel test, you need to complete the following steps:

  • All the relevant data for a selected payroll cycle should be exported from the old provider. This includes information such as taxes and benefits.
  • The exported information should then be input into the new payroll system.
  • Payroll should be run using the new system.
  • The results from using the new system can then be compared to the old system in order to catch and address any inconsistencies. 
  • Once you’ve identified any discrepancies, these issues should be addressed and further parallel testing should be conducted to ensure that the issues have been resolved.

This kind of testing not only helps you to spot any errors before you go live with a new system, but it also gives you the peace of mind of knowing that your new payroll system is running as it should be.
Though payroll implementation can feel like an overwhelming process, a great payroll provider will have a team of experts ready to answer any questions you may have and to help you overcome any hurdles.

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